Real impact of incubators vs outside success

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Figuring out real entrepreneurial success rates is surprisingly tricky!

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  • GEM defines nascent entrepreneurs as those individuals who are past the initial conception stage, and are involved in setting up a business.Gem defines this as owning and operating a business that is less than 42 months old.The sum of nascent entrepreneurs and new business owners.Percentage of 18–64 age group who have, in the past 12 months, discontinued a business, either by selling, shutting down or otherwise discontinuing an owner/management relationship with the business. Note: This is not a measure of business failure rates.
  • Real impact of incubators vs outside success

    1. 1. The Impact of anEnterprise Development Institution on the Success of High Tech SMEs
    2. 2. The Research Project What is the economic impact of one of the oldest and largest business incubators in Africa? Interviewed ±100 clients, graduates, stakeholders Analysed their survival & growth 2 12-Aug-9 Ben Zaaiman
    3. 3. The Incubator’s Clients & Grads DidReally Well, But How Would TheyHave Done Without It?
    4. 4. 4 12-Aug-9 Ben Zaaiman
    5. 5. First Question: What was the NaturalFailure Rate of ICT SMMEs? What is an SMME? What constitutes a failure? Where is the data? 5 12-Aug-9 Ben Zaaiman
    6. 6. USA South Africa Country Nascent 4.8 5.1 Entrepreneurship Rate6 New Business 2.8 3.9 Ownership Rate12-Aug-9 Total Early Stage 7.6 8.9 Entrepreneur-ship ActivityBen Zaaiman Established Business What is an SMME? 7.7 2.1 Ownership Rate Discontinuation of 3.8 4.8 Business Necessity-Driven TEA 28 36 Improvement –Driven 51 31 TEA Source: GEM 2010
    7. 7. Not All Discontinuations Are Failures Opportunity to Sell 100% Exit Planned in Advance Other Job or Bus. Opportunity 84% Retirement Personal Reasons IncidentProblems Getting Finance Not Profitable Source: GEM 2010, Efficiency-Driven Economies 2010 0% 7 12-Aug-9 Ben Zaaiman
    8. 8. South Africa’s Failure Record is a Tale of Two Economies% of 18-64 year olds Discontinuing Entrepreneurial Activity 20 15 10 5 SA 10 20 30 40 50 GDP per Capita at PPP ($,000) Source: GEM 2010 8 12-Aug-9 Ben Zaaiman
    9. 9. U.S. Longitudinal Failure / Exit Rates90% Scott A. Shane, "The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By," Yale University (2008) 81%80% 76% 68%70% 63% 60%60% 55% 55% 51%50% 48% 49% 46% 44% 45% 42% 41% 40% 40% 39%40% 41% 37% 34%30% 25.0% 30% 27%20% 19.4% 14.7% 15.1% 12.5% 10.7% 10.0% 11.1% 11.8% 8.1% 8.8%10% 9.3% 7.5% 6.5% 7.3% 5.8% 4.6% 3.8% 3.1% 2.6% 2.2% 1.9% 1.7%0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Still in Business Business Failure Rate Still Self-Employed Self-Employment Exit Rate 9 12-Aug-9 Ben Zaaiman
    10. 10. Survival & Hazard vs. Average Entrant Size Canada90% 83%80% 75% 68%70% 58%60% 59% 50%50% 48% 44% 39%40% 40% 35% 32% 34% 30%30% 29% 27% 25% 25% 26% 23% 22%20% 18% 21% 18% 16% 17% 15% 14% 12% 11% 11%10% 10% 10%0% 1 2 3 4 5 6 7 8 9 10 11 Small Average Entrant Size Small ASE Failure Rate Medium ASE Survival Medium ASE Failure Rate Large ASE Survival Large ASE Failure Rate 10 12-Aug-9 Ben Zaaiman
    11. 11. Estimated ICT SMME Survival and Failure Rates in Western Cape Over 11 Years 80% 70% 60% 50% 40% 30% 20% 10% 0% 1 2 3 4 5 6 7 8 9 10 11Cumulative Survival 75% 59% 48% 40% 34% 30% 27% 24% 21% 19% 17%Annual Failure Rate 25% 22% 19% 16% 14% 13% 12% 11% 11% 10% 10% 11 12-Aug-9 Ben Zaaiman
    12. 12. Surviving Company Growth Model Annual Growth Rate by Remaining Native Survivors Assumed Growth Rate by Remaining Incubated Survivors 27% 27% 26% 26% 26% 26% 27% 26% 25% 25% 25% 24% 24% 23% 23% 22% 22% 22%1 2 3 4 5 6 7 8 9 10 13 12-Aug-9 Ben Zaaiman
    13. 13. Net Revenue Growth In Successive Years Native Revenue Incubated Revenue 4.7 4.3 3.9 3.4 3.0 2.6 2.2 1.8 1.7 1.5 1.6 1.4 1.2 1.3 1.2 1.1 0.9 1.0 1.0 0.91 2 3 4 5 6 7 8 9 10 14 12-Aug-9 Ben Zaaiman
    14. 14. Aggregate Jobs per Initial Job in All Start- Ups Native Jobs Incubated Jobs 3.5 3.4 3.3 3.1 2.9 2.7 2.4 2.1 1.8 1.5 1.3 1.2 1.1 1.0 0.9 0.8 0.8 0.7 0.7 0.71 2 3 4 5 6 7 8 9 10 15 12-Aug-9 Ben Zaaiman
    15. 15. Annual Failure Rates Converge to a Baseline30%25%20%15%10%5%0% 1 2 3 4 5 6 7 8 9 10 Baseline Native Failure Rate Native Failures Due to Inexperience 16 12-Aug-9 Ben Zaaiman
    16. 16. DISCUSSION 17 12-Aug-9 Ben Zaaiman
    17. 17. Thank You! Ben Zaaiman www.dcisio.com ben@dcisio.com +27 83 448 4336 BZaaiman 18 12-Aug-9 Ben Zaaiman

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